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What’s Up Nokia? And Why Elop Should Go – Part Deux

By Charles Moreira

Several years before Elop’s announcement of Nokia’s tie-up, Nokia had been working on ways to make it easier for its developers according to a three-pronged approach.

First, it cut its number of software development kits from 15 to 2 – i.e. a Qt SDK for Symbian and MeeGo and a Java SDK for Java phones. Developers had been complaining about having to cope with such a large number of SDKs for different devices, while Qt is an applications framework which lets them write once, run anywhere without having to bother about the underlying platform.

Second, Nokia made it easier for developers by charging them a fee of 1 euro for one-time publishing and free Symbian signing and Java verification of their apps.

Third, to let especially consumers without credit cards, PayPal or other such accounts to buy content and apps from Ovi Store through operator billing, Nokia would give developers 60% of the nett end-user price after deduction of any applicable sales tax and other levies in their respective countries – or about 56.7% of the published price of their applications and content, while Nokia takes care of the different revenue share terms of different operators in different countries.

In 2010, the Nokia Ovi Store was accessible on over 120 Nokia devices across over 190 countries and Nokia has billing agreements in place with 99 operators across 27 countries and 30 local language versions of Ovi Store.

“When operator billing and credit card payments are available, it’s been known to increase downloads by 13 times,” said Mathers.

Nokia was also open to other forms of apps distribution, including vending kiosks, on CD or Thumb drive, since it’s not only in poorer countries where fewer people have credit cards, but also in highly advanced countries such as Germany.

Reseller boycott
In a rambling, over 9,000 words post on his blog ‘Communities Dominate Brands’ in April, 2012, best-selling author, 3G strategy consultant and motivational speaker Tomi Ahonen identified Nokia’s problems as being due to a reseller boycott.

“There is a huge, almost unprecedented problem specifically in the reseller channel, and very weirdly, it is across cities, across carriers, across countries, across continents. There seems to be a sudden comprehensive global reseller boycott organised against Nokia, Lumia and Microsoft,” said Ahonen.

“Right after the infamous Burning Platform memo and the Elop Effect, Nokia sales support collapsed. It was reported that in many countries, store sales staff refused to sell Nokia whatsoever. Nokia’s own quarterly reports last year told the grim tale such as in the Q2 Results: ‘During the second quarter 2011, distributors and operators purchased fewer of our devices across our portfolio’.”

Lotsa love about the Lumia range, but…

Meanwhile in China, Nokia’s most important market, the world’s largest handset market and the world’s largest smartphone market, where Nokia’s 2010 market share of smartphones was 70% according to Strategy Analytics – Nokia’s flagship stores started to sell phones by rival handset makers.

Later at the Nokia Annual Shareholders’ Meeting on 3 May, Elop himself admitted that there is in-store sales staff reluctance to sell Lumia phones.

Also, the carriers through whom most mobile phone sales are made in North America and Europe are averse to Skype which cuts into their revenues and the US boycott against Microsoft started almost immediately after Microsoft purchased Skype in mid-2011.

Anti-Microsoft smartphone sales boycotts based on in-store sales staff behaviour surveys have been reported in separate newspaper articles from San Francisco to Boston. Microsoft’s ex head of Windows Phone, Charlie Kindle admits Microsoft’s carrier relations were bad before Windows Phone, but during 2011 they got far worse as Charlie admits that Microsoft itself poisoned those relationships during 2011. So I ‘claim’ it is because of Skype,” said Ahonen.

It is even worse in Finland where Nokia’s traditional smartphone market share has been around 90% and in Nokia’s heyday, the world’s second smartphone maker at the time, Research in Motion didn’t even bother to launch its BlackBerry there.

“A survey of stores across all three carriers and two independent handset store chains in the two biggest cities of Finland, revealed that if a customer walks in today, asking to see a Lumia, in eight cases out of 10, the sales representative would refuse to sell Lumia and push Android or iPhones instead,” he added.

Ahonen noted that the boycott began after Elop’s announcement to terminate Symbian and the Ovi Store, and to stop migration to MeeGo. This was before Microsoft acquired Skype and the subsequent boycott of Microsoft as well.

The carriers want Symbian, Ovi, Qt and MeeGo which are carrier-oriented and the Ovi & Symbian environments support over 100 languages.

“In over 60 countries there is carrier billing’ – ie. one-button payments that go directly to your phone bill. You don’t need a credit card to pay for anything. Most people in Africa, Latin America, Asia do not have credit cards – even in ‘advanced’ Germany, yes, the majority of the population does not have a credit card! but carrier billing means anyone can buy directly from the phone, clicking one button, and have it appear on the phone bill – or be deducted from the prepaid phone balance and there are localised app stores in all those countries and more,” said Ahonen.

“Windows Phone does not even support the Arabic language (spoken by 340 million people – yes, more than the total US population). There are no apps in Chinese (that’s 1.3 billion people, in case you are counting, I.e. 4x as many as the USA).

“And the control of the Nokia/Symbian/Ovi/Qt/MeeGo environment rests with the carriers. Nokia has been very open, it even invited NTT DoCoMo the biggest carrier of Japan to be a charter member with Symbian, and China Mobile the same with MeeGo – no such carrier involvement exists with any Microsoft software platforms,” he added.

As for its phones, Nokia’s 2010 flagship smartphone, the N8 running Symbian^3 and upgradable to Symbian Belle, won the best cameraphone of the year awards and even in February 2012, it was winning side-by-side comparisons against all rival top cameraphones one year newer.

Nokia’s next flagship, the N9 running MeeGo was universally loved in every single review published and had the most positive reception of any Nokia phone ever released, whether smart or dumb, and the only phone among any manufacturers since 2007 (when the iPhone launched), to be regularly rated either as good or indeed better than the contemporary iPhone. The N9 won the Design & Advertising Industry Award in the UK where it’s not even sold, beating the Apple iPad2 and the Lumia 800.

In February Nokia’s top device in the Windows Phone line of smarpthones, the Lumia 900 won the phone of the event award in the USA.

Then the Nokia 808 PureView running Nokia Belle (formerly Symbian Belle) won the most coveted award at the Mobile World Congress in Barcelona in March, 2012.

“Oh, and this 808 PureView runs on the ‘supposedly obsolete’ Symbian OS. An OS so advanced, that Microsoft’s Windows Phone cannot support its features until 2013 at the earliest, so says Nokia, not me,” said Ahonen.

“I know many of us geeks feel Symbian is past its bedtime, but the facts are, it is an excellent OS that is very robust for ‘traditional’ phone needs such as the cameraphone, messaging etc. But it was not designed to be a touchscreen OS, so of course its touchscreen lags those who were built to be touchscreen OS platforms like the iPhone and Android. But Symbian today supports tons of features you can’t do on an iPhone or Windows Phone or Blackberry etc.

“I did not say Symbian is good for Nokia’s future; it is not. But Symbian is not dead either. It is particularly strong on more basic traditional needs (like calls, battery life, messages, camera, etc.). While Palm died, Windows Mobile is dead, Blackberry OS is obsolete, Symbian is not.

Ahonen proposes that Nokia halts Lumia production and reverts to Symbian and its migration path through Qt, Ovi, MeeGo and its successor.

Fire Elop
“The only problem is, that the CEO (Elop) refuses to sell these superphones globally. Nokia’s bestselling markets in the affluent industrialised world, where most smarpthones are sold, include Germany (population 80 million), UK (60), Italy (55), Spain (50) and France (65). And Mr Elop refuses to let the N9 be sold in any of them. But he is willing to send the N9 to such far-away nations as New Zealand (population 4 million) or Singapore (4). Or in some of the poorest countries like Nigeria. Yeah.. Makes sense? And the 808 PureView? The only Nokia Symbian phone recently that US press have liked. Elop refuses to sell it in the USA.” he added.

“Unless Nokia can get the carriers to volunteer to lift their sales boycott, Nokia dies. So how can we make them believe this above total reversal from the very public statements by Elop? He has to go, concluded Ahonen and he’s not the only one.

In his 19 September article in DailyTech, Jason Mick reported that Nokia’s investors are growing tired of Elop. He cited Magnus Rehle, a senior partner at telecom advising firm Greenwich Consulting, telling Reuters, “Elop has not been able to attract customers and that is what counts. You can say that he has not had enough time, but he has been there for two years. Time is up.”

Also, Juha Varis a member of Danske Invest Finnish Equity Fund, one large Nokia shareholder said, “The Christmas season is a lost cause. For Nokia, if there is any chance, it will be Spring. The beginning of next year may be the final judgement. I think that maybe the end of the first quarter is the marking point.”

Nordea analyst Sami Sarkamies said, “He has been making some brave decisions and courage is something this company has lacked for a long time before Elop joined. His starting point was really weak and it’s hard to say someone else would have done a better job.”

“But Reuters reports that even Mr. Sakarmies views Q1/Q2 2013 as the point at which Nokia must turn the quarter or show Mr. Elop the door,” he added.

Android route?
Magnus Rehle believe that Nokia should dump Windows Phone and go with Android instead but Mick sees problems with that. Firstly Nokia would lose the reported US$1 billion Microsoft is paying it over five years to stay away from Android, and it could also result in legal battles with Microsoft, given the latter’s track record of litigation against Apple.

When he announced Nokia’s partnership with Microsoft, Elop believed that Windows Phone would differentiate Nokia from the galaxy of me-too Android devices but with Samsung and HTC adopting Windows Phone, at least on some models, Nokia could become a me-too device here as well.

Status quo
However, The Next Web reported on 3 May that Nokia’s incoming chairman Risto Siilasmaa said that Nokia’s current plan will succeed and that he saw no need to change.

“Nokia is going through a very difficult period for us as shareholders, as employees and as Finns, but I am certain we have the right team, the right strategy and increasingly the right products to emerge as a very successful company,” Siilasmaa said at a press briefing prior to Nokia’s annual general meeting.

So it looks like it’s status quo for Nokia, Microsoft, Windows Phone and Elop.

Nokia was founded in Tampere, Finland in 1868 as a maker of pulp and paper products. Nokia’s website used to describe one of its first products as “soft tissue paper.” Its second mill was near on the banks of the Nokiavirta River near the town of Nokia, which which it got its name.

If its current decline continues, perhaps Nokia will have to revert to making soft tissue paper.